The Mortgage Market – Week ending 9/14/07

Recently, the August Report of the Case-Shiller S&P Housing Survey stated that housing prices, nationally, declined at an annual rate of 3.2%.  What the local headlines in the Denver Area missed is that Denver is now in its third month of appreciation.  Denver is poised to move into one of the top spots of twenty metro areas tracked in the report.

So, what is happening with rates?  Conventional rates are actually doing OK.  They are staying steady in the low to mid sixes without much fluctuation.  I will come back to this when I discuss Treasury movements.  Nonconforming products continue to take a beating with rates in the upper sevens.  I expect Nonconforming rates to continue to stay high until the market gets its head on straight.  Having said this, some investors are beginning to segment the nonconforming market to reward good borrowers.

Mortgage (Treasury) rates recently dropped recently to a point where, in my opinion, the bonds that are supporting those rates are now overbought.  If my inclination is correct, compounded by my instinct that the Fed will lower the prime rate next week, I think mortgage rates will soon start to increase.  So, if you are considering buying or refinancing, I recommend a "sooner rather than later" plan of attack.

Because the music has stopped in many pockets nationally, many areas are seeing real decline.  This is, in my opinion, only going to get worse, as many borrowers in the wrong mortgage product will a) not be able to continue making their payments, leading to b) have to vacate a property creating a glut of additional homes on the market.  This will serve to drive prices down further.

And, it gets worse.  As this happens, economies will slow down and the nation could move into a recessionary period where jobs and incomes will be reduced.  You can see where this is going.

However, locally, I continue to see good things on the horizon.  Denver has a good, growing jobs market; housing prices are reasonable, especially compared nationally; foreclosure rates are declining compared nationally; housing inventories are declining; and new housing starts are down substantially.  This all creates a lower supply side on an economic scale and, with a stable to increasing demand side, housing prices should go up.

Greg Polashock is a Real Estate Home Mortgage Loan Consultant and Certified Mortgage Planning Specialist with Cherry Creek Mortgage and resides in Castle Rock, in Douglas County Colorado.  He can be reached via email at Greg@GregIsFinancingSolutions.com, by phone at 303-887-0672 or on the web at http://www.gregisfinancingsolutions.com/.